The Securities and Exchange Commission of Pakistan (SECP) has introduced a Passive Equity Sub-Fund under the Voluntary Pension Scheme (VPS), offering savers a low cost way to invest in the stock market from January 1, 2027.
Pension fund managers will be required to offer the new sub-fund alongside existing Equity, Debt and Money Market Sub-Funds. The option will allow savers to choose between actively managed equity funds and passive funds that track a specified market index.
Pension fund managers can manage the new sub-fund by tracking a market index directly or investing in exchange traded funds (ETFs). Under the ETF-based option, managers can invest in equity ETFs listed on the Pakistan Stock Exchange, providing diversified exposure to the equity market.
The management fee for an ETF-based Passive Equity Sub-Fund will be capped at 0.75 percent per year. If a pension fund manager invests in ETFs managed by its own asset management company, it cannot charge an additional management fee, avoiding two layers of fees on the same investment.
SECP Chairman Dr. Kabir Ahmed Sidhu said the new sub-funds would give pension savers more choice in managing retirement savings and provide a cost-efficient way to participate in the stock market.
He said the reform would support wider participation in the voluntary pension system and strengthen long-term retirement savings.
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